I was going to hold off on this and give President Obama the benefit of a doubt – at least for a few months. Nevertheless, after reading the magnificent piece by Barry Ritholtz, entitled: “The Tragedy of the Obama Administration”, I decided that it was time to start discussing leadership alternatives for the next Presidential term.

On October 30, the Associated Press published the results of a poll it conducted with Knowledge Networks. Forty-seven percent of the Democrats surveyed expressed the opinion that Obama should be challenged for the 2012 Democratic Presidential nomination. In the wake of the mid-term election massacre, I expect that more Democrats will be anxious to find a new standard-bearer for their party in 2012. The AP article concerning the AP-KN poll, mentioned the theory that the public’s opinion of Obama could change if the economy improves. Unfortunately, most American consumers will not observe any significant improvement in the economy during the next two years. There is a greater likelihood that the Chicago Cubs will win next year’s World Series.

We currently find ourselves bombarded with a wide spectrum of opinions, which purport to explain what the results of the 2010 elections really mean. The most obvious conclusion to be drawn from this event is that the voters resent being taken for chumps. Obama’s supporters were promised change they could believe in by a President and a party that sold its soul to the Wall Street megabanks at the cost of America’s future economic health. When he had the opportunity to do so in early 2009, Obama refused to put those too-big-to-fail, zombie banks through temporary receivership. As a result, we are now approaching a situation which – according to financial risk management expert Chris Whalen – will necessitate another round of bank bailouts. When President Obama had the opportunity and the public support (not to mention Democratic control over both houses of Congress) to enact an adequate stimulus program to save the economy from a decade(s) – long, Japanese-style recession, he refused to so. If an extra $600 billion had been added to the $787 billion in 2009 (as part of a better-thought-out, infrastructure-based stimulus program) we would be experiencing significant economic growth and a recovering job market right now. Australia keeps reminding us of this. (Oops! Australia just did it again!) Instead, America finds itself in a situation wherein the Fed is now appropriating that $600 billion toward another round of quantitative easing, which will serve no other purpose than to push investors into the stock market. According to economist Andy Xie, those stock investors will have an unpleasant experience when Chairman Bernanke’s latest asset bubble pops in 2012.

While many Senate Democrats (along with operatives from the Treasury Department) were busy removing all of the teeth from the financial reform bill, Maria Cantwell was fighting those efforts as one of the few advocates for the American taxpayers. Back on May 19, Arthur Delaney and Ryan Grim of The Huffington Postdescribed how Senator Cantwell stood up to the efforts of Harry Reid to use cloture to push the financial reform bill to a vote before any further amendments could have been added to strengthen the bill. Notice how “the usual suspects” – Reid, Chuck Schumer and “Countrywide Chris” Dodd tried to close in on Cantwell and force her capitulation to the will of the kleptocracy:

There were some unusually Johnsonian moments of wrangling on the floor during the nearly hour-long vote. Reid pressed his case hard on Snowe, the lone holdout vote present, with Bob Corker and Mitch McConnell at her side. After finding Brown, he put his arm around him and shook his head, then found Cantwell seated alone at the opposite end of the floor. He and New York’s Chuck Schumer encircled her, Reid leaning over her with his right arm on the back of her chair and Schumer leaning in with his left hand on her desk. Cantwell stared straight ahead, not looking at the men even as she spoke. Schumer called in Chris Dodd, who was unable to sway her. Feingold hadn’t stuck around. Cantwell, according to a spokesman, wanted a guarantee on an amendment that would fix a gaping hole in the derivatives section of the bill, which requires the trades to be cleared, but applies no penalty to trades that aren’t, making Blanche Lincoln’s reform package little better than a list of suggestions.

* * *

“I don’t think it’s a good idea to cut off good consumer amendments because of cloture,” said Cantwell on Tuesday night.

Senator Cantwell has proven herself worthy of our trust. Her nomination as the 2012 Democratic Presidential candidate will revive the excitement and voter enthusiasm witnessed during the 2008 campaign. On the other hand, if President Obama decides to seek a second term and wins the nomination, we will likely find a greater enthusiasm gap than the example of November 2. As a result, by January of 2013 we could have a new administration in the White House, espousing what economist Nouriel Roubini describes as “the economic equivalent of creationism”.

Quite a number of commentators have expressed shock in reaction to a recent Gallup Poll pitting a “generic Democrat” against a “generic Republican” for Congress. As of August 30, the Democrat was trailing by a huge, 10-point margin (51% to 41%). Gallup described it as “the largest in Gallup’s history of tracking the midterm generic ballot for Congress”. An examination of the graph reveals that the hypothetical Democrat’s 49-43 lead in mid-July was lost approximately one week later.

There has been widespread speculation as to the cause of this reversal of fortune. Byron York wrote a piece for The Washington Examiner, which considered a more recent Gallup Poll, pinpointing the particular issues where the Republican position was more popular. Mr. York then provided his own opinions as to why and how the “generic Democrat” was faltering on some of these issues. With respect to the economy, York said this:

In October 2006, Democrats held a 53 to 37 lead over Republicans on the issue. Now, after Democrats passed an $862 billion stimulus bill and touted 2010 as the “summer of recovery,” Republicans hold a 49 to 38 lead. Democrats have gone from having a 16 point lead to being 11 points behind.

As for the problem of corruption in government, York gave this interpretation of the polling results:

Back in ’06, a large majority — 51 percent to 28 percent — trusted Democrats more than Republicans to deal with the issue. Now, with Democrats facing high-profile ethics proceedings in Congress, Republicans hold a 38 to 35 lead.

The subject of terrorism was another area where Mr. York offered his opinion on the public’s renewed preference for Republican stewardship:

Just before the ’06 elections, Democrats held a 47 to 42 lead on protecting against terrorism. Now, after Ft. Hood, Detroit, and the Times Square bombing attempt, Republicans hold a 55 to 31 lead.

I have a different perspective on what has been motivating the voters to favor a “generic Republican” candidate. Given the format of the poll, I believe the responses are rooted in archetypal motivations rather than the positions and actions of individual candidates on particular issues. For example, consider the timing: Late July was when President Obama was taking his umpteenth vacation and playing golf for the zillionth time. Democrats from the Senate (more so than Congressional Dems) had just sold out to Wall Street by completely eviscerating the so-called, financial “reform” bill, making it as much of a farce as their healthcare “reform” artifice. The two “reform” shams were widely perceived as a betrayal of the Democratic Party “base” by both houses of Congress as well as the Obama administration. The aggregate impact of those two legislative hoaxes impacted the public’s understanding of the extent to which corruption and economic irresponsibility were apparent in their Democratic leaders. I don’t believe it’s so much a problem with excessive spending (i.e. stimulus efforts) as it is with plain-old sleaziness. “Countrywide Chris” Dodd’s skullduggery is more likely seen as a serious problem than the antics of Charlie Rangel and company.

President Obama’s inability to take a decisive position on anything – his constant attempts to travel up the fork in the road – are recognized as weak leadership, which is then reinforced as a trait of all Democrats. The constant golfing and vacationing during this crucial period have helped augment the image of a dilettante — as well as an ineffective and/or unconcerned official. As a result, voters are less confident that these leaders can protect them from terrorism. When a terrorist succeeds, that event magnifies the perceived weakness, regardless of whether and how many other attempted terrorist schemes may have been thwarted under the current administration.

Meanwhile, pollster Nate Silver has come along to tell us that we’re all reading too much into those recent Gallup Polls. In an article for The New York Times, Mr. Silver benefited the rest of us with his unique Brainiac perspective:

The reasons for the Democrats’ decline are, as we say in the business, overdetermined. That is, there are no lack of hypotheses to explain it: lots of causes for this one effect. The economy? Sure. Unpopular legislation like health care? Yep. Some “bad luck” events like the Gulf Oil spill? Mmm-hmm. The new energy breathed into conservatives by the Tea Party movement? Uh-huh.

And this hardly exhausts the theories. An inexperienced White House that has sometimes been surprisingly inept at coping with the 24/7 news media cycle? The poor optics associated with Democrats having had a filibuster-proof majority in theory, but not always in practice? All of the above.

These causes can’t be so easily untangled on the basis of polling evidence; there’s really no basis on which to evaluate the competing hypotheses. This is particularly so given that different types of political events aren’t isolated from one another — health care reform might have been unpopular, for instance, but the reason for its unpopularity may ultimately have been the economy.

For this reason, we can be skeptical of two types of analysis: claiming that Factor X definitely isn’t contributing to the Democrats’ troubles, and asserting that it definitely is.

Regardless of the cause, the Democrats are headed for serious trouble in November. As far as I’m concerned: It serves them right.

Last February, Republican Congressman Ron Paul introduced HR 1207, the Federal Reserve Transparency Act of 2009, by which the Government Accountability Office would be granted authority to audit the Federal Reserve and present a report to Congress by the end of 2010. On May 21, Congressman Alan Grayson, a Democrat from Florida, wrote to his Democratic colleagues in the House, asking them to co-sponsor the bill. The bill eventually gained over 300 co-sponsors. By October 30, Congressman Mel Watt, a Democrat from North Carolina, basically “gutted” the bill according to Congressman Paul, in an interview with Bob Ivry of Bloomberg News. Watt subsequently proposed a competing measure, which was aided by the circulation of a letter by eight academics, who were described as a “political cross-section of prominent economists”. Ryan Grim of The Huffington Post disclosed on November 18 that the purportedly diverse, independent economists were actually paid stooges of the Federal Reserve:

But far from a broad cross-section, the “prominent economists” lobbying on behalf of the Watt bill are in fact deeply involved with the Federal Reserve. Seven of the eight are either currently on the Fed’s payroll or have been in the past.

After HR 1207 had been undermined by Watt, an amendment calling for an audit of the Federal Reserve was added as amendment 69B to HR3996, the Financial Stability Improvement Act of 2009. The House Finance Committee voted to approve that amendment on November 19. This event was not only a big win for Congressmen Paul and Grayson — it also gave The Huffington Post’s Ryan Grim the opportunity for a “victory lap”:

In an unprecedented defeat for the Federal Reserve, an amendment to audit the multi-trillion dollar institution was approved by the House Finance Committee with an overwhelming and bipartisan 43-26 vote on Thursday afternoon despite harried last-minute lobbying from top Fed officials and the surprise opposition of Chairman Barney Frank (D-Mass.), who had previously been a supporter.

* * *

“Today was Waterloo for Fed secrecy,” a victorious Grayson said afterwards.

Scott Lanman of Bloomberg News pointed out that this battle was just one of many legislative onslaughts against the Fed:

The Fed’s powers and rate-setting independence are under threat on several fronts in Congress. Separately yesterday, the Senate Banking Committee began debate on legislation that would strip the Fed of bank-supervision powers and give lawmakers greater say in naming the officials who vote on monetary policy.

* * *

Paul and other lawmakers have accused the Fed of lax oversight of banks and failing to avert the financial crisis.

Federal Reserve Chairman Ben Bernanke is feeling even more heat because the Senate Banking Committee will begin hearings concerning Bernanke’s reappointment as Fed Chair. The hearings will begin on December 3, the same day as President Obama’s jobs summit. Senate Banking Committee chair, Chris Dodd, revealed to videoblogger Mike Stark that Bernanke’s reappointment is “not necessarily” a foregone conclusion.

Let’s face it: the public has finally caught on to the fact that the mission of the Fed is to protect the banking industry and if that is to be accomplished at the public’s expense — then so be it. Back at The Huffington Post, Tom Raum explained how this heightened awareness of the Fed’s activities has resulted in some Congressional pushback:

Many lawmakers question whether the Fed’s money machine has mainly benefited financial markets and not the broader economy. Lawmakers are also peeved that the central bank acted without congressional involvement when it brokered the 2008 sale of failed investment bank Bear Stearns and engineered the rescue of insurer American International Group.

Tom Raum echoed concern about the how the current increase in “anti-Fed” sentiment might affect the Bernanke confirmation hearings:

Should Bernanke be worried?

“Not only should be worried, he’s clearly ratcheted up his game in terms of his communications with Congress,” said Norman Ornstein, a senior fellow at the American Enterprise Institute.

Ornstein said the Fed bashing this time is different from before, with “a broader base of support. And it’s coming from people who in the past would not have hit the Fed. There’s a lot of populist anger out there — on the left, in the center and on the right. And politicians are responsive to that.”

Populist anger with the Fed will certainly change the way history will regard former Fed chairman, Alan Greenspan. Fred Sheehan’s new book: Panderer to Power: The True Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession, could not have been released at a better time. At his blog, Sheehan responded to five questions about Greenspan, providing us with a taste of what to expect in the new book. Here is one of the interesting points, demonstrating how Greenspan helped create our current crisis:

The American economy’s recovery from the early 1990s was financial. This was a first. The recovery was a product of banks borrowing, leveraging and lending to hedge funds. The banks were also creating and selling complicated and very profitable derivative products. Greenspan needed the banks to grow until they became too-big-to-fail. It was evident the “real” economy — businesses that make tires and sell shoes — no longer drove the economy. Thus, finance was given every advantage to expand, no matter how badly it performed. Financial firms that should have died were revived with large injections of money pumped by the Federal Reserve into the banking system.

It’s great to see Congress step up to the task of exposing the antics of the Federal Reserve. Let’s just hope these efforts meet with continued success.

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About TheCenterLane.com

TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.